The United States Department of Justice, Antitrust Division, along with several states’ attorneys general have sued Visa, MasterCard, and American Express alleging that the card systems’ rules prohibiting merchants from offering discounts to consumers who use a particular card brand constitute unreasonable vertical agreements in restraint of trade. The Division simultaneously filed a proposed consent decree entered by Visa and MasterCard in which they propose to settle the case by agreeing to permit merchants to offer discounts based on the card brand or card type (e.g., rewards v. standard) that a customer uses. American Express has stated an intent to litigate the case. The consent decree specifically does not limit the Visa and MasterCard rules prohibiting merchants from surcharging cards, card brands, or card types, nor does it require that merchants be permitted to discriminate among card issuers within the Visa or MasterCard System.
Seventh Circuit Upholds Wisconsin Minimum Gas Pricing Regulation
October 5, 2010 – 3:10 pm
The Seventh Circuit overturned an injunction prohibiting Wisconsin from enforcing its minimum gas pricing regulations and remanded with instruction to enter judgment for the state. The plaintiff, Flying J, alleged that the minimum pricing scheme led to a horizontal cartel among gas retailers to raise the price of gas. The trial court sided with Flying J, chastising the state for failing to respond to allegations that the regulations led to increased prices. But the Seventh Circuit reversed on the ground that the state is ultimately responsible for the minimum price that private parties merely enforce. The plaintiff failed to provide evidence of actual collusion among gas retailers.
Another Guilty Plea in DOJ Air Cargo Cartel Probe
October 1, 2010 – 11:25 am
Update October 2010: Six international freight forwarding companies have agreed to pay criminal fines in the U.S. case totaling $50.3 million.
Update July 2010:Northwest Airlines, now part of Delta, has plead guilty and agreed to pay a $38 million fine and assist in the on-going investigation. Delta stressed that the illegal conduct occurred before it merged with Northwest.
Update Aug. 2009: In a private follow on action, Eastern District of New York Judge John Gleeson reversed a magistrates dismissal of price fixing claims on Twombly grounds citing the 15 guilty pleas in the case. Although the pleas did not necessarily establish the broad conspiracy alleged, they were sufficient to make the claims sufficiently plausible to survive a motion to dismiss.
Update April 2009: Three more cargo airlines have plead guilty and agreed to pay fines. Cargolux Airlines International (based in Luxembourg) agreed to pay $119 million, Japan’s Nippon Cargo Airlines agreed to pay $45 million, and Korea’s Asiana Airlines agreed to pay $50 million. Together airlines have not paid fines exceeding $1.6 billion, and the investigation is on-going.
Update January 2009: Three more cargo airlines have plead guilty and agreed to pay fines. LAN Cargo, and its subsidiaries agreed to pay $109 million, and El Al Israeli Airlines agreed to pay $15.7 million.
A former British Airways executive agreed to a $20,000 fine and eight months jail time in the DOJ’s ongoing investigation of the international air cargo industry. The joint US/EU, Korean probe began in 2006. By August 2007, international air shippers began admitting to fixing prices on air cargo shipments. To date, Air France-KLM, British Airways, Cathay Pacific Airways, Japan Airlines, Korean Airlines, Martinair Holland, Qantas, SAS Cargo Group have all been fined. The British Airways official is the first foreign national to be charged.
Conspiracy to Inflate Auto Insurance Rates Not Exempt From Challenge
September 30, 2010 – 10:44 am
Update September 2010: The Ninth Circuit has denied rehearing.
The Ninth Circuit has reversed the dismissal of a putative class action alleging that major auto insurers conspired to use inferior repair parts while telling their customers that they were providing premium repair service that would return cars to “pre-loss” condition. As a result of the conspiracy, the plaintiff’s alleged, they paid more for auto insurance than they would have in a competitive market, violating California’s state antitrust law. The district court had dismissed the case on the ground that it effectively challenged insurance rates approved by the state insurance commission, which cannot be challenged in court. The Ninth Circuit held that the state insurance commission does not take account of potentially anticompetitive behavior in deeming a rate reasonable, and thus plaintiffs were entitled to raise their antitrust claims. The appellate court made clear, however, that it was not determining whether the complaint otherwise stated a claim.
Claim that Kitchenaid Monoplized Mixer Attachment Market Dismissed
September 15, 2010 – 4:42 pm
Update September 2010: The court again dismissed the complaint. Although the plaintiff amended the complaint to allege that Kitchenaid sells 80% of stand-up mixers and 90% of the beater attachments for mixers that are sold by the plaintiff, the court held that the complaint failed to identify harm to competition as opposed to harm to the plaintiff.
Update April 2010: The court dismissed the complaint without prejudice for failing to adequately allege a market and injury to competition. The plaintiffs then filed an amended complaint.
In a recent District of Arizona case, Pourfect Products has sued Whirlpool subsidiary KitchenAid alleging that the company violated Section 2 by telling retailers that an attachment fir KitchenAid’s popular mixer that is manufactured by Pourfect would damage the mixing bowl and void the warranty. Pourfect alleges that (1) the tests relied upon by KitchenAid did not involve normal use of the attachment and (2) attachment’s sold by KitchenAid were likely to cause greater harm to the bowl than Pourfect’s attachment. Pourfect alleges that KitchenAid’s false and misleading statements were made with the specific intent of monopolizing the mixer attachment market. This case is likely to pose interesting questions about whether a market exists for attachments to a particular popular product.
EC Investigates Paper Envelope Manufacturers
September 15, 2010 – 9:01 am
The EC has inspected the premises of seven paper envelope manufacturers in Denmark, France, and Spain. The Commission is investigating possible price fixing and customer division agreements. The names of the targets were not released.
Milk Monopolization Case to Move Forward
August 31, 2010 – 4:17 pm
Vermont District Court Judge Christina Reiss refused to dismiss attempted monopolization claims filed by dairy farmers against the Dairy Farmers of America, Inc. and Dean Foods Co. Although questions remained about the product market and whether the statute of limitations was met, the court found the allegations sufficient to move forward. The court did dismiss conspiracy claims on the ground that the complaint failed to allege that the defendants were sufficient separate entities to form an agreement under Section 1 of the Sherman Act.
Class Action Alleges Price Fixing in the Sale of Optical Disc Drives
August 31, 2010 – 3:17 pm
Classes of direct and indirect purchasers have filed suit in the Northern District of California alleging that optical disc drive manufacturers have violated the antitrust laws. The complaint alleges that the defendants agreed to charge higher prices and rig electronic auctions to ensure that the certain price floors were maintained.
DOJ Signs Off on United-Continental Merger
August 31, 2010 – 3:06 pm
The Antitrust Division agreed not to challenge the United-Continental merger when the merging airlines agreed to lease 18 pairs of takeoff and landing slots at Newark Liberty International Airport to discount carrier Southwest Airlines. Aside from the concern about barrier to entry into Newark, which were alleviated by the leasing agreement, the Antitrust Division took the position that the merger was complementary and would benefit consumers. Eight states and the District of Columbia, however, continue to have open invesitgations involving the merger. Nevertheless, the parties stated an intent to close by October 1.
EC Investigating Marine Insurance Providers
August 31, 2010 – 2:57 pm
The EC is investigating a network of ship insurers known as the International Group of Proection & Indemnity Clubs exploring concerns about claim-sharing and joint-reinsurance agreements. The EC announced that it would look into whether the organization’s agreements with member insurers restrains competition. The investigation was triggered by the expiration of an exemption applicable to insurance agreement covering a large share of the market.